TDS TCS Under GST

Chapter 14: TDS TCS under GST Intra State Supply

CGST + UP - SGST
Section 51 [Tax deduction at source (TDS)] Suppliers Place Recipient Place
Uttar Pradesh Punjab
1. Following Person Shall Deduct Tax u/s 51
✓ Central Govt./State Govt. → Department/Establishment
✓ Local Authority In Such Case TDS is deduct in form of UP- State tax that would not be possible
✓ Government Agencies to be deducted by Recipient in Punjab. Hence TDS N.A. on Such transaction.
✓ Public Sector Undertakings
✓ Society Established by CG/SG under Society Act Analysis
✓ An Authority/Board or other body Location Of Place Of Supply Location Of TDS u/s 51
▪ Setup by an act of Parliament/State legislature Supplier Recipient
▪ Where 51% or more equity/control with Govt Uttar Pradesh Uttar Pradesh Uttar Pradesh Yes
✓ Any Registered Person receiving supply of Metal Scrap from other RP Delhi Uttar Pradesh Uttar Pradesh Yes
Delhi Delhi Uttar Pradesh No
2. When to Deduct TDS? Chandigarh Chandigarh Chandigarh Yes
Supply of taxable Goods & or Services under a Contract exceeds Rs. Chandigarh Chandigarh Ladakh No
2,50,000 excluding GST. Further TDS will be deducted even if the supplier Chandigarh Ladakh Ladakh Yes
is a composition Tax Payer.
5. Other Points
3. TDS Rate ✓ Deductor Shall Deposit TDS Deducted by 10th of Succeeding month.
1% (CGST) + 1% (SGST) or 2% (IGST) on payment made or credited to supplier ✓ TDS Certificate in form GSTR-7A shall be provided to deductee.
for taxable goods & services. [Value shall be taken for deduction of TDS, ✓ TDS deducted shall reflect in Cash ledger of deductee.
exclusive of GST shown in Invoices] ✓ Failure to Deposit TDS- Interest @18% & Penalty.

4. When not Required to Deduct TDS? Section 52 [Tax Collected at source (TCS)]
✓ Value of taxable Supplies in a Contract Value ≤ Rs 2,50,000.
✓ Contract value > Rs 2,50,000 for both taxable as well as exempt supply, 1. Who shall collect TCS
but the value of taxable supply under contract ≤ Rs 2,50,000. ✓ Every E-Commerce Operator (Not an agent)
✓ Exempt Supplies. ✓ Shall collect TCS from the Net Amount collected by ECO.
✓ Supply Under RCM
✓ Payment made to Unregistered Supplier. 2. TCS Rate.
✓ Goods / Services Supplied between person notified to deduct TDS, 0.25% (CGST) + 0.25% (SGST) or 0.5% (IGST) on Net Value of taxable Supplies.
except in case of RP receiving metal scrap from other RP.
✓ Location of Supplier & Place of Supply (In Same State & But Recipient's 3. Net Value = Value of G/S Supplied - Returned Supply
place in other State)
 TDS TCS Under GST

4. Eco Obligation Issue 2: What if Supplier-side ECO is himself the supplier of the said supply,
➢ Eco Shall File Statement in form GSTR-8 & Deposit TCS within 10 who is liable for compliances u/s 52 including collection of TCS?
days from end of month Clarification: In such a situation, TCS is to be collected by the Buyer-side ECO
➢ Eco Shall also file Annual Statement GSTR 9-B before 31st Dec
following end of FY Detailing Supplier also an
Buyer Buyer side ECP
• Outward Supplies of G/S Including returns made ECO
• Amount collected as TCS while making payment to the supplier for the particular supply being made
through it.
5. TCS Not applicable in following cases
a. Supplies Own Product through website hosted by him Other Provisions Related To TCS
b. Supplies Different Vendor Product & amount collected by Vendor
Only 1. Unregistered persons with AATO up to threshold limit permitted to
c. Supply of Services notified under section 9(5) supply goods through an ECO.
d. Exempt Supplies
e. Recipient Required to pay tax on RCM. Person not liable for registration u/s 22 shall be allowed to make supply
f. Supply of Services by Supplier not liable to register. Goods through ECO subject to following conditions:
1. Restricted from making inter-State supply of goods;
Clarifications 2. Restricted from making supply of goods through ECO in more
than one State/UT;
1. Clarification on TCS liability in case of multiple ECOs in one transaction
3. Must be having PAN
In the case of the ONDC Network (Open Network for Digital Commerce) there
4. Before making any supply of goods through ECO, declare on
can be multiple ECOs in a single transaction - one providing an interface to the
the common portal:
buyer and the other providing an interface to the seller.
a. PAN
Issue 1: In a situation where multiple ECOs are involved in a single b. address of business and
transaction of supply of goods or services or both through ECO platform and c. State/UT in which such persons seek to make such
where the supplier-side ECO himself is not the supplier, who is liable for supply.
compliances of section 52? 5. EN have been granted on the common portal on successful
validation of the PAN declared above.
Buyer side Supplier
Buyer Supplier 6. such persons shall not be granted more than one enrolment
ECP side ECO
number in a State/UT.
Clarification: The compliances u/s 52, including collection of TCS, is to be done 7. no supply of goods shall be made by such persons through ECO
by the supplier-side ECO who finally releases the payment to the supplierfor a unless such persons have been granted EN on the common portal.
particular supply made by the said supplier through him. #EN = Enrolment Number

Obligations Of ECO where URP makes supply through it.

1. ECO shall allow the supply of goods through it by URP only if EN has
been allotted.
 TDS TCS Under GST

2. ECO shall not collect tax at source under section 52.

3. ECO shall furnish the details of supplies of goods made through it in
Form GSTR-8.
Where multiple ECOs are involved in a single supply of goods through ECO
platform, “ECO” shall mean the ECO who finally releases the payment to the
said person for the said supply made by the said person through him.

Special procedure to be followed by ECOs in respect of supplies of goods

through them by composition taxpayers
a. The ECO shall not allow any inter-State supply of goods through it by
the said person.
b. The ECO shall collect TCS.
c. The ECO shall furnish the details of supplies of goods made through it in
Form GSTR-8.
 Supply Under GST

Meaning of Goods
Chapter 2: Supply under GST
Actionable Claim to Any
Taxable Event under GST → Supply of G/S/ Both claims debt
Includes
GST is payable by Taxable Person when G/S supplied within Taxable Territory Any Kind of Growing crops , Grass and
Movable Other Things*
FCM → GST Payable by Supplier Property
Do not Money &
GST Mechanism
Include Securities
RCM → GST Payable by Recipient

Other Things*
Types of Supply It Includes things attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply
LOS & POS is in CGST &
Intra-State
Types of the same State SGST Immovable Property → Not considered as G/S
Supply LOS & POS is in Lottery / Betting / Gambling
Inter-State IGST
different state
Casino
#LOS = Location of Supplier Specified Actionable Claims
#POS = Place of Supply considered as Goods
Online Gaming
•Covered under GST but Government
Exempt Supply VDA [Crypto / Bit-Coins]
Exemption
•Supplies Not covered under GST
Non-Taxable Supply
•E.g. Alcoholic liquor + HP-MAN Meaning of Services

Zero-Rated Supply •Exports or Supplies to SEZ units

Use of Money
Includes
Nil Rated Supply •Covered under GST with Nil Rate Activities Facilitation / Arranging Transactions in Securities
relating to
Anything Conversion of money for a consideration
Taxable Supply •All other supplies within Taxable territory
Do not
Goods, Money & Securities
Include

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 Supply Under GST

General Meaning of Supply [Section 7(1)(a)]

• Includes all forms of supply of G/S Example: Infosys limited upgraded their 1000 Laptops and
• When they are for consideration [Something in return whether cash / kind] donated their old laptops (ITC Claimed) to the Government
• In the Course or Furtherance of business [Business Transaction] Schools. In this case, such donation is treated as supply as
per Schedule I.
Supply includes
in the course Transaction 02
sale, transfer,
for or Supply = Supply b/w related or distinct person [Registered under same PAN] +
barter, exchange,
consideration furtherence of in the course or furtherance of business + w/o consideration
license, rental,
business
lease and disposal
Example: Free supplies to related persons, stock transfers to a unit outside the
State/a different business vertical, etc. will be reckoned as supplies.
Section 7(1)(aa)
Activities or transactions between an association, club or similar entities and Meaning of Related Persons:
its members constituents as ‘supply’. ✓ Spouse and children → always related
Note: members and the entity shall be deemed to be two distinct persons ✓ Parents, Grandparents & siblings → only if dependent
✓ Officers or directors of another business
Example: ✓ Employer-Employee relationship
a) Resident Welfare Association (RWA) of Sanskriti Society supplies air- ✓ Partners of Firm
conditioners to its members at a concessional price. ✓ Members of same family
b) A RWA collects maintenance charges from its members for services ✓ One person controls another
provided. ✓ Any person holds twenty-five per cent or more of shares of both of them

Section 7(1)(b) Meaning 0f Distinct Persons:

Supply = Import of Service + Consideration Paid + in course or furtherance of A person who has obtained/is required to obtain more than one registration,
business whether in one State/UT or more than one State/UT shall, in respect of each
#Import of Service for Personal Purpose → Exempt under GST such registration, be treated as distinct persons

Section 7(1)(c) [Transactions covered under Schedule I] Transaction 03 & 04

Supply = Transaction in course or furtherance of business + Consideration Supply = Supply b/w Principal & Agent + w/o consideration
Paid
Agent = Person having
Schedule I Transactions: a) Right to receive title of Goods [Invoice made in the name of Agent by
Transaction 01 Principal]
Supply = Permanent Transfer of business asset + w/o consideration + ITC b) Right to Pass title of Goods [Invoice prepared by Agent for customer]
availed

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 Supply Under GST

Transaction 05 Construction of SOS if whole or part consideration received before

Supply = Import of Service + From related person or own establishment o/s building / complex COC or its first occupation whichever is earlier
India + In the course or furtherance of business + w/o consideration Permitting use of SOS
IPR
Consideration Paid Software a) General Software + online download = SOS
b) General Software + offline purchase = SOG
c) Customised Software = Always SOS
Yes No Agreeing to obligation (There is agreement)
Refrain from an act SOS Ex: Non-compete Fees
To tolerate an act SOS Ex: Tolerating late delivery of Goods
Supply u/s In course or FOB + Import To do an act SOS Ex: Cancellation Charge
7(1)(b) from Related Person Works contract SOS.
Restaurant SOS.

Yes No Section 7(2) + Schedule III [Transactions outside ambit of GST – Negative List]
1. Service by ER to EE as per contract [No GST on salary]
#Benefits not as per contract shall be liable for GST as ER & EE are Related
Supply u/s
7(1)(c) Not a supply Person
2. Gift by ER to EE up to Rs. 50,000 during the FY
#if Exceeds Rs. 50,000 = Entire amount shall be Taxable
Section 7(1A) [Classification of supply of G/S] 3. Services of Court / Tribunal
Goods a) Title Transfer (Immediate/Future) = SOG 4. Services of Neta [MP, MLA, etc.]
b) Right to use = SOS 5. Sale of land and building
Land or Building a) Title Transfer = outside ambit of GST 6. Actionable claims except 6 claims [Refer meaning of Goods Section]
b) Right to use (Rent/Lease/Tenancy) = SOS 7. Services of Funeral, burial, mortuary & Transport of deceased [Marne wale
Job Work SOS se NO GST]
Business Asset a) Transfer = SOG 8. Alcoholic Liquor License [Other license taxable under RCM]
b) Put to use for private purpose = SOS 9. Apportioned premium to co-insurer by lead insurer for joint supply of
c) Ceases to be taxable person = Deemed supply insurance services provided lead insurer paid full GST on entire insurance
immediately before such event premium paid by the insured
Exceptions of point c : 10. Ceding commission or re-insurance commission deducted by insurer from
a) Business transferred as Going concern re-insurance premium paid by the insurer to re-insurer, provided re-
b) Appointment of Personal Representative insurer paid the GST on Gross reinsurance premium payable by insurer.
Renting of L/B SOS 11. Shares held in a subsidiary company by holding company

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 Supply Under GST

Section 8 [Bundled Supply] if Art Gallery acts as an Agent = Section 7(1)(c) applicable [Refer
Transaction 03 & 04]
Bundled Supply
Composite Supply Mixed Supply 4. Tenancy Rights [Pagadi]
Bundling in the ordinary course of Bundling not in ordinary course of
business [Natural Bundle] business [Not a natural bundle] Meaning: Arrangement where Landlord sells Tenancy rights to Tenant for lump
sum consideration & also charges periodical rent from tenant
GST Rate = Rate applicable on GST Rate = Rate of G/S carry higher
✓ The transfer of tenancy rights cannot be treated as sale of land/ building.
Principle Supply GST Rate
✓ Transfer of tenancy rights to a new tenant against consideration in the
Ex: Mobile Phone + Charger Ex: Gift Baskets form of tenancy premium is taxable
[Principle supply is Mobile] ✓ Services provided by outgoing tenant by way of surrendering the tenancy
rights against consideration in the form of tenancy premium is liable to
#More than 1 supply made together = Neither composite nor mixed supply GST.

Clarifications 5. Donations
1. Printing services If Donation is Philanthropic + Not leads to any advertisement of Donor = No
If Main Supply is Content = SOS GST
Ex: Restaurant Menu , Invitation Card , etc. If Donation is not Philanthropic + leads to advertisement of Donor = SOS
If Ancillary / Customization option is availed = SOG
Ex: Envelopes 6. Interstate movement of various modes of Conveyance b/w distinct person

#jaha par bina content ke material ready nahi ho sakta wala SOS applicable #Movement of conveyance b/w distinct person for
hoga Transport service of Goods / Passenger is not a supply
Ex: Books, Pamphlet, Wedding Cards, etc. [Ex: Movement of Trains from one station to another]

#jaha par brandname / Logo / Trademark print karwana ancillary hai wala SOG #Movement of conveyance to Distinct Person for further supply = SOS
applicable hoga
Ex: Cartoon Boxes, Tissue paper, Napkins, T-Shirt with Logo of Co., etc. #Movement of Conveyance for Repair and maintenance = No GST on Movement
But GST applicable on Repair services
2. Retreading of Tyres [Pasting new grip on old tyres to make it new]
Selling of old tyre by supplier after retreading = SOG 7. Services of DCA [Guarantee of Payment Recovery i.e. bad debts burden
Supplier paste new grip on old tyre belongs to recipient = SOS met by DCA]

3. Art work sent by artist to gallery for Exhibition Issue 01: Agent includes DCA?
Exhibition of art work = SOS [Invoice for commission charged] Yes if DCA has right to receive or pass the title [Refer section 7(1)(c)
Transaction 03 & 04 read with Schedule I]

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 Supply Under GST

It is not taxable as recipient does not desires dishonour of cheque & there
Issue 02: DCA is not an agent and extends short term loans to customer & is no agreement b/w recipient & payer to accept such dishonour
charges interest. Whether interest included in Value of G/S supplied by
principal? 13. Penalty for Violation of Law
No as loan is granted by DCA to customer in his individual capacity It is not taxable as such fines / penalties
are levied to discourage violation of law
Issue 03: DCA is agent & makes payment to principal on behalf of customer & & not for tolerating the violation of law
DCA recovers interest from customer along with VOS for delayed payment?
Delayed payment charges recovered by DCA shall be included in VOS made by 14. Cancellation Charges
DCA to customer ✓ Cancellation fee can be considered as the charges for the costs
involved in making arrangements for the intended supply
8. Buy One get one free offer ✓ The facilitation service of allowing cancellation against payment made
✓ It can at best be treated as supplying two goods for the price of one. is also a natural part of this bundled service.
✓ Taxability of such supply will be dependent upon as to whether the supply ✓ Hence the same will be assessed as that of the principal supply.
is a composite supply or a mixed supply and the rate of tax shall be
15. Late Payment / Surcharge / Fees
determined accordingly.
✓ The facility of accepting late payments with interest or late payment
fee is a facility granted by supplier naturally bundled with principal
9. No Claim Bonus [Bonus on renewal of insurance for not claiming old supply.
insurance] ✓ Hence this ancillary supply naturally bundled should be assessed at
It is not a SOS as this facility is optional & not under obligation the same rate as that of principal supply.
10. Food supplied in Cinema Halls 16. ER forfeited salary or payment of bond where EE leaves
If Cinema Ticket + Foods supplied together for single price = Treat as employment before agreed period
composite supply It is not taxable as ER never desires that EE leaves
Principle supply = Supply of Cinema Exhibition organization before agreed period and such Bond
conditions are entered to discourage non-serious EEs to
If Cinema Ticket+ Foods acquired separately = Treat as SOS [Restaurant apply for Job
Service]
17. Fixed Charges for Power
✓ Price charged for electricity has two components -
11. Liquidated Damages [consideration received for breach of contract] minimum fixed charge & variable per unit charge.
It is not taxable as no one desires breach of contract & there is no ✓ Minimum fixed charge which remains at all situations
agreement b/w parties to accept breach of contract does not mean that it is a charge for tolerating act of
non-consumption of minimum threshold.
12. Cheque Dishonour charges

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 Supply Under GST

✓ Both are charged for sale of electricity and thus not taxable as sale of Example:
electricity is exempt from GST. A distributor replaces a refrigerator compressor using their stock and
invoices the manufacturer ₹5,000. GST is payable on ₹5,000 by the distributor.
Clarification on liability to pay GST in respect of WRR services during
warranty period. 2. Manufacturer Supplies Parts to Distributor Without Charge
#WRR = warranty-related replacements or repairs The distributor requests the manufacturer for parts to replace under
warranty, and the manufacturer provides the parts at no charge. No GST is
When a manufacturer provides WRR for goods without charging additional payable on the supply of parts by the manufacturer.
consideration, is GST applicable?
✓ No as the value of the original supply already Example:
includes the cost of warranty services, and GST A distributor requests a faulty motor from the
would have been paid on it at the time of supply. manufacturer, which is provided free of cost for
✓ However, if the manufacturer charges any extra warranty replacement. No GST is applicable.
amount for replacements or services, GST is payable on that additional
amount. 3. Credit Note Issued by Manufacturer
The distributor replaces parts using stock received earlier from the
Does a distributor need to pay GST when providing WRR on behalf of the manufacturer. The manufacturer issues a credit note for the replaced parts,
manufacturer without charging the customer? adjusting tax liability.
No. However, if the distributor charges any additional consideration from the
customer, GST is payable on that amount. Example:
A distributor replaces a fan blade from their stock, which was earlier
Does the replacement of parts under warranty involve a taxable supply purchased from the manufacturer. The manufacturer issues a credit note for
between the distributor and manufacturer? ₹2,000, and tax liability is adjusted.
There can be 4 Scenarios in this case:
4. Replenishment of Distributor’s Stock
The distributor replaces parts using their stock and later raises a requisition
1. Distributor Charges Manufacturer
to the manufacturer. The manufacturer replenishes the stock via a delivery
The distributor replaces parts from their stock or buys them from a third
challan without charging consideration. No GST is payable on this
party and issues a tax invoice to the manufacturer for reimbursement. GST is
replenishment.
payable on this supply by the distributor to the manufacturer.

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 Supply Under GST

Example:
A distributor replaces a motor from their stock and
requests replenishment. The manufacturer provides
the replacement motor via a delivery challan at no
charge. No GST is applicable.

If a distributor provides WRR but bills the manufacturer for these services via
tax invoice or debit note, is GST applicable on this activity?
The distributor is supplying repair services to the manufacturer, who is the
recipient. Therefore, GST is payable by the distributor on the services
provided to the manufacturer.

Sometimes companies provide offers of Extended warranty to the customers

which can be availed at the time of original supply or just before the expiry of
the standard warranty period. Whether GST would be payable in both the
cases?
Clarification:
1. At the time of original supply:
✓ If extended warranty is offered by the same
supplier as the goods, it is part of the composite
supply, with the principal supply being the goods.
GST is calculated on the total value, including the
extended warranty.
✓ If provided by a different supplier, it is a separate supply of services,
taxable under GST as a distinct service.

2. After original supply:

Extended warranty is treated as a distinct supply of services, separate from
the original supply of goods, and GST is payable as applicable on the service.

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